SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-QSB - Quarterly or Transitional Report
/X/ QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1998
// TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from to
Commission File Number 33-16163-LA
Nashville Super 8 Ltd., A California Limited Partnership
(Exact name of small business issuer as specified in its charter)
California 33-0249749
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
1466 9th Avenue, San Diego, CA 92101
(Address of principal executive offices)
(619) 699-6100
(Issuer's telephone number)
(Former name, former address and former fiscal year,
if changed since last report)
Check whether the registrant (1) has filed all reports required to be filed by
Sections 13 or 15(d) of the Exchange Act during the last 12 months (or for such
shorter period that the issuer was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Yes /x/ No / /
State the number of limited partnership interests outstanding as of the latest
practicable date: 3,975
PART I. -- FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Incorporated herein is the following unaudited financial information:
Balance Sheet as of June 30, 1998 and December 31, 1997..
Statement of Operations for the three and six month periods ended June 30,
1998 and June 30, 1997.
Statement of Cash Flows for the three and six month periods ended June 30,
1998 and June 30, 1997.
Notes to Financial Statements.
NASHVILLE SUPER 8 LTD.
A California Limited Partnership
Balance Sheet
June 30, 1998 and December 31, 1997
(Unaudited)
(Part 1 of 2)
June 30, December 31,
ASSETS 1998 1997
----------- ------ --------
Current Assets:
Cash and cash equivalents $ 95,269 $ 159,319
Accounts receivable 28,285 17,447
Operating supplies 15,455 15,455
Prepaid expenses 4,270 4,947
----------- ----------
Total current assets 143,279 197,168
Investment property, at cost:
Land 711,092 711,092
Building and improvements 2,888,459 2,854,422
Furniture, fixtures and equipment 634,574 634,303
------------ ------------
4,234,125 4,199,817
Less accumulated depreciation 1,307,428 1,252,452
------------- ------------
Investment property,
net of accumulated depreciation 2,926,697 2,947,365
------------- -------------
Franchise fees, net (note 3) 10,917 11,417
------------- -------------
$3,080,893 $3,155,950
============= =============
See accompanying notes to financial statements.
Page 1
NASHVILLE SUPER 8 LTD.
A California Limited Partnership
Balance Sheet
June 30, 1998 and December 31, 1997
(Unaudited)
(Part 2 of 2)
LIABILITIES AND March 31, December 31,
PARTNER'S CAPITAL ACCOUNTS 1998 1997
-------------------------------- ------------ -----------------
Current liabilities:
Notes Payable (note 5) $ 9,023 $ 8,163
Accounts payable and accrued expenses 60,921 82,430
Due to affiliates (note 4) 11,027 11,553
----------- -----------
Total current liabilities 80,971 102,146
----------- -----------
Long-term debt, less
current portion (note 5) 150,990 156,121
----------- -----------
Total liabilities $ 231,961 $258,267
----------- -----------
Partners' capital accounts (deficit):
General Partners:
Cumulative net earnings $ 11,857 $ 16,732
Cumulative cash distributions (71,950) (71,950)
------------- -------------
(60,093) (55,218)
Limited partners:
Capital contributions,
net of offering costs 3,449,823 3,449,823
Cumulative net earnings 106,744 150,620
Cumulative cash distributions (647,542) (647,542)
-------------- -------------
2,909,025 2,952,901
-------------- -------------
Total partners' capital accounts 2,848,932 2,897,683
-------------- ------------
$3,080,893 $3,155,950
============== ============
See accompanying notes to financial statements.
Page 2
NASHVILLE SUPER 8 LTD.
A California Limited Partnership
Statement of Operations
Three Months and Six Months Ended
June 30, 1998 and June 30, 1997
(Unaudited)
THREE MONTHS ENDED SIX MONTHS ENDED
June 30, June 30, June 30, June 30,
1998 1997 1998 1997
--------- ---------- --------- -----------
Revenues:
Room revenues $ 293,843 $ 376,871 $ 511,690 $564,660
Phone revenue 7,257 4,697 14,431 7,973
Interest income 410 82 1,188 141
Other income 836 795 1,061 937
----------- ----------- ---------- ----------
302,346 382,445 528,370 573,711
----------- ----------- ---------- ----------
Expenses:
Property operating expenses 181,495 165,101 332,309 277,362
Depreciation 27,686 44,575 54,976 86,732
General and administrative 36,064 44,930 72,982 83,941
Amortization 250 250 500 500
Management fees 18,116 22,942 31,631 34,414
Royalties and advertising 14,693 18,843 25,585 29,965
Real estate taxes 7,991 10,388 19,013 19,725
Interest expense 4,333 4,516 8,629 8,916
Marketing 15,112 16,904 31,496 29,324
------------ ------------ ---------- -----------
305,740 328,449 577,121 570,879
------------ ------------ ---------- -----------
Net earnings $ (3,394) $ 53,996 $ (48,751) $ 2,832
============ ============ ========== =========
Net earnings per limited
partnership interest $(0.77) $ 12.23 $(11.04) $0.64
========= ========== ========= ========
See accompanying notes to financial statements.
Page 3
NASHVILLE SUPER 8 LTD.
A California Limited Partnership
Statement of Cash Flows
Three Months and Six Months Ended
June 30, 1998 and June 30, 1997
(Unaudited)
THREE MONTHS ENDED SIX MONTHS ENDED
June 30, June 30,
1998 1997 1998 1997
--------- --------- -------- ---------
Cash flows from operating activities:
Net earnings (loss) $ (3,394) $ 53,996 $ (48,751) $ 2,832
Adjustments to reconcile net income to cash:
Depreciation and amortization 27,936 44,825 55,476 87,232
(Increase) decrease in other assets:(14,846) (45,404) (10,161) (40,209)
Increase (decrease) in:
Accounts payable and
accrued expenses 11,802 45,576 (21,509) 26,122
Due to/from Affiliates 2,375 (25,295) (526) 6,287
Net cash provided by (used in) ----------- ---------- --------- ---------
operating activities 23,873 73,698 (25,471) 82,264
----------- ---------- --------- ---------
Cash flows from investing activities:
Investment property expenditures (31,108) (1,984) (34,308) (48,039)
----------- ---------- --------- ---------
Net cash used in investing activities (31,108) (1,984) (34,308) (48,039)
----------- ---------- --------- ---------
Cash flows from financing activities:
Proceeds/(Payments) of notes payable (2,177) (1,935) (4,271) (3,984)
Cash distributions to partners 0 0 0 0
Net cash provided by (used in) ----------- ---------- --------- ---------
financing activities (2,177) (1,935) (4,271) (3,984)
----------- ---------- --------- ---------
Net increase (decrease) in cash (9,352) 69,779 (64,050) 30,241
Cash and cash equivalents,
beginning of period 104,621 30,730 159,319 79,268
------------ ---------- --------- ---------
Cash and cash equivalents,
end of period 95,269 109,509 95,269 109,509
=========== ========== ========= =========
See accompanying notes to financial statements.
Page 4
NASHVILLE SUPER 8 LTD.,
A California Limited Partnership
Notes to Financial Statements
June 30, 1998
(Unaudited)
Readers of this quarterly report should refer to the partnership audited
financial statements and annual report Form 10-KSB (File No. 33-16163-LA) for
the period ended December 31, 1997, as certain footnote disclosures which
would substantially duplicate those contained in such financial reports have
been omitted from this report.
1. THE PARTNERSHIP AND A SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nashville Super 8 Ltd., A California Limited Partnership (the Partnership),
(formerly Motels of America Series XI), a California Limited Partnership, was
formed on September 1, 1988 pursuant to the California Revised Uniform
Limited Partnership Act. The purpose of the Partnership is to construct,
own, and operate a 110-room "economy" motel under a Super 8 Franchise. The
motel was opened in April 1989.
The following is a summary of the Partnership's significant accounting policies:
CASH AND CASH EQUIVALENTS
The Partnership considers all highly liquid instruments purchased with an
original maturity of three months or less to be cash equivalents.
INVESTMENT PROPERTY
Investment property is recorded at cost. Depreciation is computed using the
straight-line method based on estimated useful lives of 5 to 39 years.
Maintenance and repair costs are expensed as incurred, while significant
improvements, replacements, and major renovation are capitalized.
FRANCHISE FEES
Franchise fees are amortized over the 20-year life of the franchise agreement.
Organization costs are amortized over a 60-month period.
INCOME TAXES
No provision for income taxes has been made as any liability for such taxes
would be that of the partners rather than the Partnership.
(Continued)
Page 5
NASHVILLE SUPER 8 LTD.,
A California Limited Partnership
Notes to Financial Statements (Continued)
Net income per interest is based upon the 90% allocated to limited partners
divided by 3,975 limited partner interests outstanding throughout the year.
2. PARTNERSHIP AGREEMENT
Net income or loss and cash distributions from operations of the Partnership are
allocated 90% to the limited partners and 10% to the general partner. Profits
from the sale or other disposition of Partnership property are to be allocated
to the general partner until its capital account equals zero; thereafter, to the
limited partners until their capital accounts equal their capital contributions
reduced by prior distributions of cash from sale or refinancing plus an amount
equal to a cumulative but not compounded annual 8% return thereon which
cumulative return shall be reduced (but not below zero) by the aggregate amount
of prior distributions of cash available for distribution; thereafter, gain
shall be allocated 15% to the general partner and 85% to the limited partners.
Loss from sale shall be allocated 1% to the general partner and 99% to the
limited partners.
3. FRANCHISE AGREEMENT
The Partnership has entered into a twenty-year franchise agreement with Super 8
Motels, Inc. to provide the Partnership with consultation in the areas of
design, construction and operation of the motel. The agreement required the
payment of an initial fee of $20,000 and ongoing royalties equal to 4% of gross
room revenues and a chain-affiliated advertising fee equal to 2% of gross room
revenues.
During 1994, the franchise agreement with Super 8 was amended to reduce the
Partnership's area of protection in exchange for the franchisor reducing by
one-half the liquidated damages that would be payable by the Partnership in
the event it elects an early termination of the franchise agreement. The
area of protection released by the Partnership is small in relation to the
original area of protection and is to the south and west of the Partnership's
motel, away from Opryland and other growth areas. In addition, if the
franchisor grants a franchise in the released area and the occupancy rate at
the Partnership's motel drops by three or more percentage points for any twelve
month period, the Partnership may reduce the royalties from 6% to 5% of gross
room sales and reduce the royalties payable for the balance of the franchise
agreement or terminate the franchise agreement upon payment of the reduced
liquidated damages. The occupancy rate was 51.81% in 1996 compared to 65.38%
in 1995 and, therefore, management has notified Super 8 that the Partnership
is entitled to the reduction in royalties approximately payable for the balance
of the franchise agreement.
4. RELATED PARTY TRANSACTIONS
The motel is operated pursuant to a management agreement with GHG Hospitality,
Inc. (GHG). The agreement provides for the payment of monthly management fees
of 6% of gross revenues.
Page 6
NASHVILLE SUPER 8 LTD.,
A California Limited Partnership
Notes to Financial Statements (Continued)
The Partnership has agreed to reimburse GHG for certain expenses related to
services performed in maintaining the books and administering the affairs of
the Partnership.
GHG and an affiliate, GMS Management Services, Inc. (GMS), allocate to the
Partnership certain marketing, accounting, and maintenance salaries and certain
other expenses directly related to the operation of the Partnership.
Fees and reimbursements for partnership administration expenses paid to GHG and
GMS for the three months and six months ended June 30, 1998 and June 30, 1997
are as follows:
Three months Ended Six Months Ended
6/30/98 6/30/97 6/30/98 6/30/97
--------- --------- --------- ---------
Management Fees $ 18,116 $22,942 $31,631 $34,414
Reimbursement for partnership
administration expenses 5,850 4,419 11,699 11,196
Salaries and other
allocated expenses 6,367 7,079 11,464 17,273
In addition, all motel employees are paid by GMS. For the six months ended
June 30, 1998, the Partnership reimbursed GMS $177,320.for the wages of these
employees including a one percent processing fee. At June 30, 1998, $11,027.
was owed to GHG and GMS relating to reimbursement for these operating expenses.
5. LONG-TERM DEBT
The Partnership has a note payable to a bank due in monthly installments of
approximately $2,150, including interest at the bank's index rate plus 2%
(10.5% at June 30, 1998) through August 2009. The note is secured by a first
priority deed of trust on the Partnership's motel and the unpaid balance at
June 30, 1998 was $160,013. The fair value of long-term debt approximates its
carrying amount based on the borrowing rates currently available to the
Partnership for loans with similar terms.
(Continued)
Page 7
NASHVILLE SUPER 8 LTD.,
A California Limited Partnership
Notes to Financial Statements (Continued)
5. LONG-TERM DEBT (Continued)
Principal payments on this note are due as follows:
July 1998 - Dec 1998 $ 4,397.
1999 9,532.
2000 10,609.
2001 11,807.
2002 13,140.
Thereafter 110,528.
------------
$ 160,013.
============
6. ADJUSTMENTS
In the opinion of the general partners, all adjustments (consisting solely of
normal recurring adjustments) necessary for a fair presentation have been made
to the accompanying figures as of and for the six months ended June 30, 1998.
7. SUBSEQUENT EVENT
In August 1998 the Partnership paid a distribution of $45,000.24 to the limited
partners.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
Financial Condition:
On September 1, 1987, the Partnership commenced its public offering pursuant to
its Prospectus. On September 27, 1988, the Partnership completed the public
offering. The Partnership received $3,449,823 (net of offering costs of
$525,177) from the sale of limited partnership interests. These funds were
available for investment in property, to pay legal fees and other costs related
to the investments, to pay operating expenses, and for working capital. The
majority of the proceeds was used to acquire and construct the 110-room
"economy" motel on approximately 2 acres of land.
Construction of an indoor swimming pool, workout center, and spa and renovations
of the lobby and certain guest rooms were completed in 1995. The total cost of
the project was approximately $677,300. The project's cost was funded by cash
from operations and a loan of $184,258 from First Bank & Trust of Tennessee. As
of June 30, 1998, a principal balance of $160,013. was outstanding on this note.
The note is payable in monthly installments of approximately $2,150 including
interest at two points over the index which is the New York Consensus Prime as
quoted in the Wall Street Journal. The interest rate at June 30, 1998 was
10.5%. The final balance is due August 2009. The note is secured by a first
priority deed of trust on the Partnership's motel.
Page 8
NASHVILLE SUPER 8 LTD.,
A California Limited Partnership
Notes to Financial Statements (Continued)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS (Continued)
Financial Condition:
An independent appraisal valued the Partnership's motel property at $3,200,000
as of August 26, 1996. An update of this appraisal was completed in August 1997
showing the same value of $3,200,000. The carrying amount of investment
property on the Partnership's financial statements was $2,926,697. as of
June 30, 1998. During 1994, the franchise agreement with Super 8 was amended to
reduce the Partnership's area of protection in exchange for the franchisor
reducing by one-half the liquidated damages that would be payable by the
Partnership in the event it elects an early termination of the franchise
agreement. The area of protection released by the Partnership is small in
relation to the original area of protection and is to the south and west of
the Partnership's motel, away from Opryland and other growth areas. In
addition, if the franchisor grants a franchise in the released area and the
occupancy rate at the Partnership's motel drops by three or more percentage
points for any twelve month period, the Partnership may reduce the royalties
from 6% to 5% of gross room sales and royalties payable for the balance of the
franchise agreement or terminate the franchise agreement upon payment of the
reduced liquidated damages. The occupancy rate was 51.81% in 1996 compared
to 65.38% in 1995 and, therefore, management has notified Super 8 that the
Partnership is entitled to the reduction in royalties payable for the balance
of the franchise agreement.
At June 30, 1998, the Partnership had cash and cash equivalents of $95,269.
Such funds will be utilized for working capital requirements and distributions
to partners.
For the three months ended June 30, 1998, room revenues were $293,843., the
occupancy rate was 65.5% and the average daily rate was $46.51. This compares
to the three months ended June 30, 1997 when room revenues were $376,871.,
the occupancy rate was 72.62% and the average daily rate was $53.80. And for
the six months ended June 30, 1998, room revenues were $511,690., the
occupancy rate was 59.4% and the average daily rate was $44.92 . This
compares to the six months ended June 30, 1997 when room revenues were
$564,660., the occupancy rate was 56.67% and the average daily rate was
$51.94.
As requested by the limited partners in an informal survey conducted by the
general partner now that the partnership is nearing its 10th year, the majority
of the limited partners want the motel to be sold and the partnership
dissolved. consequently, the hotel brokerage firm of Hotel Partners Inter-
national has been engaged by the partnership to market the hotel for sale to
qualified buyers at the highest and best selling price. The initial listing
price is $3,7000,000. Marketing packages have been sent out to hundreds of
potential buyers and the level of interest is high. The general partner will
review all offers and select one or more offers to submit to the limited
partners for approval.
Page 9
NASHVILLE SUPER 8 LTD.,
A California Limited Partnership
Notes to Financial Statements (Continued)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS (Continued)
An June 1998 Nashville newspaper article predicted that because of the temporary
closing of the Opryland Theme Park summer business could be down as much as 40%.
The Opryland Theme Park is being remodeled to include an shopping area and will
re-open in 2000. Other reasons stated in this article for the drop in tourist
dollars are: 1) national and regional media accounts of the April's tornadoes
have damaged Nashville's reputation 2) the weather has been horrendous with
heavy, unpredictable thunderstorms dampening outdoor activities. The
partnership's revenues are down 21% when compared to 1997.
Fall 1998 business may improve. Two of the factors that may contribute to
increase business are: 1) Nashville's new NHL Hockey Team, the Predators, will
begin the season in October 1998 with 41 home games and 2) NFL's Tennessee
Oilers will be playing all of their 1998 home games in Nashville instead of
playing their games in Memphis as they did in the 1997 season.
Management has recently replaced the property's general manager. In July 1998,
Lola Martin was re-hired as general manager. Ms. Martin was the property's
general manager during the successful 1991-1995 years.
The effect of current operations on liquidity was net cash provided by operating
activities of $23,873. for the three months ending June 30, 1998 and $25,471. oF
net cash used in operating activities for the six months ended June 30, 1998.
This compares to net cash provided by operating activities of $73,698. for the
three months ended June 30, 1997 and $82,264.of net cash provided by operating
activities for the six months ended June 30, 1997. Investment property
expenditures were $34,308., for the six months ended June 30, 1998.
Seasonality:
The motel business is seasonal with the third quarter being the strongest due
to the tourist business and the last half of the fourth quarter and the first
half of the first quarter being the weakest.
Page 10
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
(REGISTRANT) NASHVILLE SUPER 8 LTD.,
A California Limited Partnership
By: GHG Hospitality, Inc.
Corporate General Partner
By:(SIGNATURE) / s / Stephen D. Burchett
(NAME AND TITLE) Stephen D. Burchett, Vice President
(DATE) August 12, 1998
By:(SIGNATURE) / s / Sylvia Mellor Clark
(NAME AND TITLE) Sylvia Mellor Clark, Controller
(DATE) August 12, 1998
Page 11